Dave Ramsey’s Guide Budgeting - Crossroads of Faith

Dave Ramsey's

Guide Budgeting

Contents

Introduction

3

How to Make a Budget

5

Using the Envelope System

9

Paycheck Frequency

11

Families and Budgets

14

You Make It All Work

17

DAVE RAMSEY'S GUIDE TO BUDGETING | 2

Introduction

Congratulations! You've already started.

Started? You may be thinking. What do you mean?

We mean that by reading this guide, you've taken the most important step toward giving yourself a solid financial future. You are already making progress. You've started.

When you make a budget, you take the first step toward getting control of your money so you can build wealth. Without a budget, it's a lot harder to get through Dave Ramsey's seven Baby Steps:

Baby

Step

1

$1,000 starter emergency fund in the bank

Baby

Step

Pay off all debts smallest to largest with the debt snowball

2

Baby

Step Fully funded emergency fund of three to six months of expenses 3

Baby

Step

Invest 15% of pretax income into retirement savings

4

Baby

Step

5

Invest for kids' college savings

Baby

Step

6

Pay off the house

Baby

Step

7

Build wealth and give a bunch away

Now let's get ahold of your money and tell it what to do.

DAVE RAMSEY'S GUIDE TO BUDGETING | 3

Introduction

What Is Most Important?

Your biggest wealth-building tool is your income, and the best way to harness the power of your income is the monthly budget. Not investing or saving for college (though those things are important). It's the budget, because from the budget flows everything else. If you want to invest money in a mutual fund, you make room for that $100 or $500 in the monthly budget. Want to get out of debt? List your debts in your spending plan. You get the idea.

Many people don't make a budget because they are afraid of what they will find. If someone has overspent to the point that they now face a mountain of debt and little or no savings, they might be shamed into stopping right there. Don't fall into that trap.

A Lesson From Hollywood

In the 1996 movie Ransom, Mel Gibson's character's son has been kidnapped (imagine that kind of emotional turmoil). Before he goes out to negotiate his son's release with a bag of money, an FBI agent gives him some helpful advice. "This here's a business transaction," the FBI agent tells him. "You're a businessman; he's a businessman. This is business." He's trying to get Gibson to take emotion out of the situation so he can think clearly and do what needs to be done. Give money. Get son. Simple.

The sad thing is that lots of people rank a budget only slightly higher than the Black Plague. Budgets to them mean no fun, bread and water for every meal, and custom-fitted straitjackets. What they don't realize is that a spending plan is the fastest way to wherever you want to go, from simply taking control of your money to getting out of debt.

We are not denying the emotion that you may be feeling. Whether it's fear, anger, shame or something else, that feeling is very real. The right time to apply that emotional energy is when you have a plan in place. Put your fear or anger aside long enough to get the numbers on paper--a business transaction. Once that's done, bring your emotion back and apply that passion and energy to the plan you've made.

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How to Make a Budget

Y ou can make a budget any way that works for you. It might be just a yellow pad and pen, or maybe it's a spreadsheet. You might choose Dave's awesome budget forms or our super helpful Gazelle Budget tool. Pick your favorite.

You must make a new budget for each month. Every time that calendar flips, there are new birthdays, holidays, insurance bills, tax refunds (we'll talk about that later), gas bills, proms and so on. There is no such thing as a "perfect" budget that works the same way every month.

If you are married, do not separate your incomes. The preacher said, "And now you are one." That includes your income! You are working together toward a goal that benefits both of you, so it doesn't matter if one of you nets $1,000 a month and the other brings home $10,000. You are now an $11,000 household.

If you want to win with money, you've got to do the details. Every month. So let's get started.

Income

On one side of the page, list all your income sources for the month. That includes:

? Paychecks ? Income from a small business ? Side jobs ? Freelance work ? Residual income ? Child support

There may be other nooks and crannies there that we didn't cover, but the overarching rule is this: If you receive money during the month, write it in your income category. There's really no such thing as "found money." If you take it in, you should write it down.

If you are married, then both of you sit down when it is time to make the monthly budget and have a Budget Committee Meeting. Both of you have input and an equal say. The person who is more detail-oriented (the nerd) can take the lead and write down the numbers, but the more laid-back person (the free spirit) also has a vote and must contribute. None of this, "Whatever you want to do, honey," stuff.

Once the budget is agreed upon, pinkyswear and spit-shake that you'll stick to it. By making the spending plan together, you put your word to doing what's on the paper. If you don't, it's breaking your word, so don't stray from the plan.

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